Obama seeks corporate tax rate cut, loophole limit
businesses would pay more but have fewer deductions, credits
WASHINGTON — President Barack Obama rolled out a corporate tax overhaul plan Wednesday that lowers rates but also eliminates loopholes and subsidies cherished by the business world. A long-shot for action in an election year, the plan nevertheless stamps Obama's imprint on one of the most high-profile issues of the presidential campaign.
The president's plan to lower the corporate tax rate to 28 percent came on the same day Republican presidential contender Mitt Romney called for a 20 percent across-the-board cut in personal income tax rates, underscoring the potency of taxes as a political issue, especially during a modest economic recovery.
Obama has not laid out a plan for overhauling personal income taxes. But he has called for Bush era tax cuts to end on individuals making more than $200,000, thus increasing their taxes, and for a 30 percent minimum tax on taxpayers who make $1 million or more.
Obama decried the current corporate tax system as outdated, unfair and inefficient. "It's not right and it needs to change," he said in a statement.
The president would reduce the current 35 percent corporate tax, which is the highest in the world after Japan but which many corporations avoid by taking advantage of deductions, credits and exemptions. Under his plan, manufacturers would receive incentives so that they would pay an even lower effective tax rate of 25 percent.
His plan would eliminate corporate tax benefits like oil and gas industry subsidies and special breaks for the purchase of private jets — two provisions that Obama has long targeted — and do away with certain corporate tax shelters.
In addition, Obama also would impose a minimum tax on foreign earnings, a move opposed by multinational corporations and perhaps the most contentious provision in the president's plan.
"It's a framework that lowers the corporate tax rate and broadens the tax base in order to increase competitiveness for companies across the nation," Obama said.
Romney has also called for a 25 percent corporate tax rate, in line with what some congressional Republicans want. Campaigning in Arizona, the former Massachusetts governor said that if elected president he would propose lowering the top personal income tax rate to 28 percent from the current 35.
In Congress, Republican reaction was mixed. House Ways and Means Committee Chairman Dave Camp, R-Mich., said he appreciated the administration's plan, though it set a corporate tax rate that is higher than the 25 percent he has proposed. He faulted Obama, however, for not offering a wholesale overhaul of the tax system for businesses and individuals.
"While this is a good step by the administration, I will borrow from the president's own words to Congress from just yesterday: 'Don't stop here. Keep going,'" Camp said in a statement. But Sen. Orrin Hatch of Utah, the top Republican on the Senate Finance Committee, dismissed the president's plan as a "set of bullet points designed more for the campaign trail than an actual blueprint for fixing our tax code."
The issue of taxation has been a recurrent theme throughout Obama's presidency. He has reduced some taxes for small businesses and has pressed Congress to temporarily cut payroll taxes on American workers to help prime the weak economy.
But he has also called for reducing the nation's long-term deficits with a mix of tax increases and spending cuts. Republicans have flatly rejected tax increases. And Romney on Wednesday criticized Obama's proposal for corporations, saying they would result in higher taxes.
Under the framework proposed by the administration, the rate cuts, closed loopholes and the minimum tax on overseas earning would result in no increase to the deficit.